The RBV theory foundation of strategic HRM: critical flaws, problems for research and practice, and an alternative economics paradigm

Published date01 November 2015
DOIhttp://doi.org/10.1111/1748-8583.12085
Date01 November 2015
The RBV theory foundation of strategic HRM:
critical flaws, problems for research and practice,
and an alternative economics paradigm
Bruce E. Kaufman, Georgia State University and Griffith University
Human Resource Management Journal, Vol 25, no 4, 2015, pages 516–540
The resource-based view (RBV) of the firm is a guiding paradigm for strategic HRM research. This
article explores the RBV–strategic HRM intersection, identifies and critiques RBV weaknesses and
problem areas, develops new implications for RBV–strategic HRM theory and empirical work, and
develops an alternative economics-based decision model for making HRM choices. The article focuses on
four RBV–strategic HRM dimensions: HRM performance and the ‘no rules for riches’ proposition;
alternative definitions of value and competitive advantage and implications for strategic HRM’s
dependent variable; neglect of marginal decision rules and consequent misprediction of optimal HRM
adoption; and the impact on employee relations of RBV-guided rent-capture practices. Numerous
implications for theory and practice are developed; also suggested is a new paradigm approach for
strategic HRM theory.
Contact: Prof. Bruce E. Kaufman, Department of Economics, Georgia State University, Atlanta,
GA 30303, USA. Email: bkaufman@gsu.edu
Keywords: resource-based view; strategic HRM; strategic factor market; economics of HRM
INTRODUCTION
People management is a critical success factor for every organisation, and managers all
over the world rate it as one of the most challenging and difficult tasks (Bloom et al.,
2012). A goal of management research is to identify which types of people management
systems and practices lead to superior firm performance and how they vary across key
contingencies and contextual conditions. This research stream has brought together the strategic
management and HRM fields into a thriving hybrid, called strategic HRM, and spawned over
the last three decades a large and rapidly growing theory and empirical literature (Jackson et al.,
2014).
A long-running debate across numerous management fields is the extent to which certain
organisational structures and practices are universally best practice versus contingent on
various moderating and contextual factors. A recent state of the art volume, HRM & Performance
(Paauwe et al., 2013), concludes in the summary chapter that the evidence to date favours a
universalistic perspective. The editors state, ‘reviews of research findings have consistently
shown that, irrespective of business strategy and context, there is a positive association between the
adoption of more “progressive”, “high performance”, or “high-commitment” HR practices and
organizational outcomes’ (pp. 197–198, emphasis added). The editors continue in the next
sentence with the observation, ‘The challenge. . .lies in providing a convincing explanation of
this association’, and in the next paragraph say (emphasis added), ‘A starting point for many
of the chapters is the resource-based view of the firm (Barney, 1991)’. Here also is the starting
point for this article.
The resource-based view (RBV, sometimes resource-based theory, RBT) has been hugely
influential across all areas of management, and most researchers agree that it is the central pillar
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doi: 10.1111/1748-8583.12085
HUMAN RESOURCE MANAGEMENT JOURNAL, VOL 25 NO 4, 2015516
© 2015 John Wiley & Sons Ltd.
Please cite this article in press as: Kaufman, B.E. (2015) ‘The RBV theory foundation of strategic HRM: critical flaws, problems for research and
practice, and an alternative economics paradigm’. Human Resource Management Journal 25: 4, 516–540.
of theory in the strategic HRM field. Allen and Wright (2007: 90) state, for example, that the
RBV is ‘the guiding paradigm on which virtually all strategic HRM research is based’, and
Nyberg et al. (2014: 319) say the RBV is ‘the linchpin that connects the strategy and strategic
HRM research literature streams’. Also illustrative, a search of the ABI/Inform electronic
database (3/2015), limited to peer-reviewed articles since 2000, finds 1,814 citations using the
combination of keywords ‘human resource management’ and ‘resource-based view’. Because
the RBV plays such a central role in strategic HRM, if the strategic HRM research programme
is to rest on a solid theory foundation, then it is critical that the underlying RBV is also a solid
and well-grounded construct. But is it?
The literature on the RBV is now 30 years old (Wernerfelt, 1984; Barney, 1986), and
incorporation of the RBV into the strategic HRM literature is 25 years old (Wright et al., 1994;
Boxall, 1996). Since the RBV has been examined, critiqued and assessed in numerous journal
articles and book chapters in both the general management literature (e.g. Priem and Butler,
2001; Kraaijenbrink et al., 2010; Leiblein, 2011; Wernerfelt, 2013) and strategic HRM literature
(e.g. Becker and Huselid, 2006; Allen and Wright, 2007; Boxall and Purcell, 2011), a legitimate
question is whether the topic is played out with little substance left to develop? (Barney et al.,
2011).
It turns out that when the RBV is examined through the lens of economic theory, a great deal
of value remains for scholarly development; indeed, an alternative paradigm frame is
suggested. In particular, I find four critical theory and practice lacunas at the core of the RBV
that so far have remained outside the strategic HRM literature, and to a substantial degree
management writ large. The four problem areas are the following: the RBV’s ‘no rules for
riches’ implications for the stability and causality of the HPWP effect on firm performance
(with similar implications for other firm performance studies, such as in marketing, finance and
risk management); the RBV’s definition of value and competitive advantage and implications
for measuring and predicting strategic HRM’s dependent variable (firm performance);
the neglect in RBV–strategic HRM of marginal decision rules and the resulting tendency for
performance-lowering HPWP investment choices and upward bias in empirical estimates of the
HPWP performance effect; and adverse employee relations implications of using RBV practices
to boost performance through rent-capture. Of course, in a literature base extending 25–30
years, some other authors (citations provided below) have noted, discussed and critiqued
various aspects of these four problem areas. Nonetheless, much of what is presented here – and
the way it is derived by using an economics theory framework – is new (compare this article
with Priem and Butler, 2001; Becker and Huselid, 2006; Kraaijenbrink et al., 2010).
The article explores two different theory intersections: first, between RBV and strategic
HRM, and second between economics and management. Thus, the article is ‘gap-filling’
because it explores the RBV–strategic HRM intersection and ‘boundary-expanding’ by bringing
into RBV/strategic HRM greater application of economic theory principles. Both critical and
constructive functions are served. Subjecting a theory to critique may seem to emphasise the
negative, but as Foss and Hallberg (2014) note in their discussion of the RBV the end result is
constructive since ‘such critique has been the driver of theoretical advancement’ (p. 904). A
particular way that critique promotes constructive advance is by focusing attention on
neglected or ill-defined concepts used in RBV/strategic HRM research, thus promoting ‘greater
precision in our use of key terms’ and ‘greater care in our articulation of core propositions’
(Leiblein, 2011: 910).
Also constructive is that the article derives the RBV critique by applying and extending an
alternative economics-based theory paradigm, earlier featured in Kaufman (2015) and Kaufman
and Miller (2011). It grounds managerial choice of HRM practices on ‘business partner’ criteria
Bruce E. Kaufman
HUMAN RESOURCE MANAGEMENT JOURNAL, VOL 25 NO 4, 2015 517
© 2015 John Wiley & Sons Ltd.

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